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Slide 1Slide 2Reasons Why Organic Prices Are Rising“Organics is becoming the private school of food”Perceived Total Benefits VS. Total PriceElastic VS. Inelastic DemandSolutions/RecommendationsCh. 7— Pricing StrategyKristy PhillipsAdolfo EscalanteMauricio Ramos• With the economy in a point of a recession, high priced items such as organic products are seeing a drop in sales.• Due to the drops in sales, retailers such as Whole Foods Market is facing difficulties of motivating customers to remain purchasing organic with the raise in prices.Falling profits and stock price off 20% in 2008.ProblemsReasons Why Organic Prices Are RisingEnergy and Commodity prices: corn farmers are using their crops to turn it into ethanolCorn, grain, and soybeans at record prices is causing farmers to grow conventionallyWith less organic farmers, prices will become increasingly high due to the lack of supply and variety.“Organics is becoming the private school of food”•Only 27% of shoppers thought organics were worth the money—even though most agreed they are healthier (WSL Strategic Retail Survey)•Only 1 out of 5 organic shoppers is a “hard-core devotee”Would rather buy less quantities of organic products than purchase non-organicPerceived Total Benefits VS. Total PriceBENEFITSPRICE• Personal satisfaction and Eco-friendly tactics• Better for consumption• NO hormones, GMO, or pesticides• Health• Purchase price• Time and effort to find and buyElastic VS. Inelastic DemandMajority of the PublicSmall increase in Price  Demand drops significantly  Elastic Availability of substitutes Bad shape of U.S. economy Comparative pricing“Hard-Core Devotees”Small increase in Price  Demand drops slightly  Inelastic “The cost of feeding myself processed foods is far greater than the cost of organic foods.” Product’s perceived quality, status, or benefits justifies priceSolutions/Recommendations1. Sell bundles of products at a discount2. Give suppliers (farms) incentives to stay organic3. Reduce operating costs to achieve competitive pricing. (Not too low or else demand will


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CSUB MKTG 4900 - Chapter 1- Pricing Strategy

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